Chinese players push up offline market sales, Xiaomi leads pack

Xiaomi has become the third largest smartphone brand in top 30 cities, piping Lenovo and Intex, on the back of Redmi Note 3, as more and more players take to offline markets to create a stronger presence and take larger market share.Gulveen Aulakh | ET Bureau | September 02, 2016, 13:22 IST

NEW DELHI: Xiaomi has become the third largest smartphone brand in top 30 cities, piping Lenovo and Intex, on the back of Redmi Note 3, as more and more players take to offline markets to create a stronger presence and take larger market share.

According to International Data Corporation (IDC) India, smartphone brands are taking the offline market seriously as demand from Tier 2&3 cities at 12.9% growth outgrows demand growth of 8.1% in Tier 1 cities, that are major hub for online sales. Sales in the top tier of cities grew 10.2% sequentially in the quarter ended June 2016.

"This is a clear indication that the offline channel cannot be wished away by vendors for operating long term in highly competitive Indian market” adds market analyst Varun Singh.

Price discipline getting established between online and offline channels, has led to a resurgence in the importance of the brick and mortar stores. The research firm said that sustainability in the longer run in the market will be driven by presence of a strong offline distribution channel.

“We are seeing changes in the distribution strategies by many vendors with many popular online exclusive models being made available offline as well, such as Xiaomi Redmi Note3, Le Eco Le1s, Moto G Turbo Edition, etc. This is indicative of an evolving hybrid distribution structure - online plus offline, which will help these vendors bring their popular smartphone models into smaller towns & cities.”

However, the aggresive push by Chinese players like Oppo anf Vivo, on the back of strong distribution channel, better channel schemes and huge promoter programmes as compared to the rest, has led to a sharp increase in their share of the market, at the cost of existing players' barring Samsung and Lyf.

Quality products at affordable prices and wide availability from the Chinese brands, have led to growth of the $150-$200 & $200-$250 price segments across top 30 cities, contributing 28% in Tier 1 cities in Q2 2016 as compared to 19% in the previous quarter.

The contribution was 24% in Tier 2&3 cities, up from 17% the previous quarter. The channel is upbeat and excited with the sales schemes being offered by the Chinese vendors resulting in fast moving stocks.

Which is why Oppo and Vivo have taken 7th and 8th positions, with 3.3% share and 2.9% share, respectively. Their model line-up is majorly placed in $200 and above price segment giving stiff competition to the global vendors in this segment.

Lenovo-Motorola slipped to fifth position in quarter ended June 2016 with 7.2% share. G4 Plus and Vibe K5 Plus launched in Q2 2016 is expected to generate demand in the coming months.

But leader of the Chinese brigade was Xiaomi with 8.1% share, at No 3 position, on the back of its hit model Redmi Note 3. The model generated massive demand owing to its loaded feature specs at an affordable price.

Samsung continues to lead the smartphone market with 28.5% share, clocking 5.7 % growth from the previous quarter, primarily due to J series launches.

Micromax maintained second position with 11.9% share. It regained share in the less than $100 price segment to be at the top position on the back of newly launched Bolt & Canvas Spark series, but is facing stiff competition from Lyf “Flame series”, analysts at IDC said.

Intex retained fourth position with 8% share, but dropped in volume growth by 4.6%. It continues to command significant share in below $100 price segment; however, channel partners feel there is an immediate need for a refreshed high decibel visibility campaign to enhance further demand.

In the above $300 price segment, Apple commanded a 35.6% share in second quarter, with majority sales driven from iPhone 5s and 6s models.

The Telecom Regulatory Authority of India (Trai) pulled up Bharti Airtel and Vodafone Idea for warning subscribers of certain plans that their SIM cards would be deactivated if they do not recharge their pre-paid accounts though these subscribers had the minimum required balance.